Pujols as part owner of the Cardinals: Not so fast!

A subject that has garnered a lot of attention in baseball circles this year is the prospect of Albert Pujols’ proposed new contract with the St. Louis Cardinals including an ownership share of the team.

According to one rumor, the idea was floated during the first quarter discussions between Pujols’ agent, Dan Lozano, and club executives, but was tabled. It came up again this week in a Jon Heyman article at SI.com.

Perhaps it will arise once again when talks resume this fall.

Is it a good or bad thing?

At first blush, the Cardinals might seem motivated to consider this concept. On a general basis, ownership has expressed a willingness to introduce creative elements into the discussions. The intent could be to use non-cash items to bring down the out-of-pocket expense on what might otherwise be an MLB-record contract.

Could there have been motivation to externally leak this particular component?

One possibility is its potential value in influencing public perception. In some quarters, the rumor mill has depicted the Cardinals as having low-balled Pujols with their contract offer. From the team’s perspective, an equity example might help de-emphasize a harsh view of the standard average annual value (AAV) calculation of the proposal.

It could be a differentiator for the Cardinals’ bid. Other clubs may be more reluctant to offer an ownership stake, instead perhaps more inclined to bid straight money and years to a player new to their organization.

It could also hurt the Cardinals’ negotiating position. While Pujols could see tax advantages in this approach as well as potential growth in his ownership share of the club over time, if chasing an MLB-record AAV is what he wants most, this would get in the way of maximizing his raw dollars and perhaps years.

Is ownership motivated?

Let’s take a quick look at the rough value of the team, as reported by Forbes. Last spring, they placed a value of $488 million on the Cardinals, the eighth-most valuable club in MLB by their estimates. A one-percent share would equate to roughly $5 million and you can do the math from there.

In other words, would it be worth it to ownership to save $50 million over the life of Pujols’ next deal to cede a ten percent share of the Cardinals? It seems a high price to pay.

There could also be internal issues. Which owners would be willing to dilute their stakes to make room for Pujols? There are over a dozen investors in the Cardinals current ownership group.

The concept of a player holding an equity stake in his team is allowable by Major League Baseball but requires permission of the commissioner. If it came down to it, would that approval be granted easily?

I would be very surprised if MLB or any team’s owners would be eager to risk the potential of exposing their books to an active player and member of the Players’ Union.

In other words, it might be good PR for the Cardinals if fans think Pujols is under consideration for partial ownership, but that doesn’t mean they intend to pull the trigger – at least initially.

Now, later or not at all?

One variation could be to give the player an option to acquire shares at a pre-defined price upon his retirement. Again, there is potential downside, though on appearance less than in the case of granting immediate team equity.

This agreement would remain on the books for another decade or so and could become an inhibitor if a broader change in ownership was considered during that time. Would a prospective new ownership group want to have Pujols involved, for example?

In recent reader polling this spring at The Cardinal Nation Blog, fans embraced the idea. Almost 50 percent of voters would include a future share of team ownership in Pujols’ new contract, while 17 percent would do it effective immediately. The other third oppose the concept regardless of when it would be executed.

Does a new CBA offer opportunity?

Recently, I have read a number of writers expressing surprise that with all the labor strife currently occurring across professional sports, specifically in the NFL and NBA, that MLB seems the exception. I wonder if they realize negotiations between the union and ownership on a new basic agreement haven’t fully gotten underway.

If completed by this coming December, the new collective bargaining agreement would take effect at that time. If not, players could continue to decide to play in 2012 on an interim basis as the new deal is hammered out. There is always the possibility of a strike if negotiations turn ugly.

One could only imagine how concerns over an active player and member of the union potentially having access to the books of a major league team might complicate negotiations.

For that reason alone, I don’t see the immediate equity scenario happening. The owners would seem to have too much to lose by the risk of opening up their financials – now or in the foreseeable future.

Does it benefit anyone other than the player?

Former commissioner Fay Vincent, who was once fired by the owners by the way, has been at the lead of the movement, pushing this concept of player equity in clubs. I recently wrote him about it, asking several questions including why the owners would ever allow this. He did not reply.

Vincent’s remarks and articles on the subject stress the tax advantages from the player perspective. I suspect Vincent also very well knows the problems it could create for ownership and to a lesser extent for the union, but apparently has reasons to downplay that important dynamic. Perhaps he is trying to build a groundswell of support among those who aren’t thinking this all the way through.

The idea of players getting access to ownerships’ finances would certainly offer the potential to disrupt the labor calm in MLB, wouldn’t it?

The union angle

MLB Players Association Executive Director and General Counsel Michael Weiner has said that he is not necessarily for or against the concept of players holding an equity share in their team while noting it would require both internal union dialogue as well as discussion with ownership. After all, perhaps the union might also be uncomfortable with owners among their rank and file.

It is important to consider possible impacts to the game once the door is opened. If granted to Pujols, there would be nothing to stop the expansion of ownership to a broader base of players. In fact, Vincent’s advocacy is not restricted to Pujols; the Cardinals star is just one immediate example.

In an October panel discussion that included Vincent, Weiner noted possible integrity issues that a broader partnership could raise. A scenario was cited in which players on one team would benefit financially if a different team was to make the playoffs.

One weak link can break the chain

My bottom line is that while the idea of granting Pujols a share of the Cardinals has a nice feel to it, the various inhibitors are such that I really question whether it will happen this fall. Any one of the items mentioned above could scuttle the idea, with likely other inhibitors not yet brought to light.

Perhaps the details of a player holding equity in his club will be hammered out some day, but it seems like it would take considerable time and effort to make it a reality.

On the other hand, if the Cardinals don’t come up with some creative aspects to successfully inject into the proposed contract other than flat dollars and years, they may be forced into the unpleasant prospect of either matching the highest bid Pujols can secure in the free agent market or watching him walk away.

Even if so, would that be more palatable to ownership than ceding a chunk of the team and everything that goes with it?